Do Kwon is one of the most bullish and energetic crypto advocates out there. As the co-founder and CEO of Terraform Labs, in better times he would take on critics and lift the crypto future to the sky: and he was also a persuasive guy who convinced many that the Terra ecosystem was where it’s at.
That past may be catching up with him. An arrest warrant has been issued in South Korea for Do Kwon and five other people associated with Terraform Labs, as reported by Bloomberg (opens in a new tab), on allegations that they breached the Capital Markets Act. South Korean prosecutors said all six people are in Singapore. Why Singapore? One reason may be that it has no extradition treaty with South Korea, meaning a long and potentially difficult legal process lies ahead if South Korean authorities press for his extradition.
This year’s crypto crash has many elements, but TerraUSD is arguably the most important single. TerraUSD (also called UST) was a so-called stablecoin, meaning that it had one purpose in the world: each TerraUSD coin had to have exactly the value of one US dollar. Something it had previously done before it fell in value this May: first with small amounts, then going into free fall. Let me give you an idea of how much value has been lost: TerraUSD, now renamed Terra Classic, was supposed to be worth one dollar per token; it is currently worth $0.000279 per token.
Crypto ecosystems are intertwined, with many new coins tying to stable coins like TerraUSD, so this was the domino that caused everything else to fall. Do Kwon was also behind the Luna token, which collapsed in value along with TerraUSD. Investors in the former were fond of describing themselves as “lunatics”, which now feels sadly ironic.
Perhaps the biggest glimpse into Do Kwon’s mindset is that when all this started happening, he created a new version of Luna. Amazingly, crypto being crypto, this has found some success, although news of the warrants has seen the new versions plummet in price.
South Korean authorities raided the home of Do Kwon co-founder Daniel Shin in July, although he is not among those who have been issued an arrest warrant. In addition to South Korea, the collapse has attracted the attention of US regulators.
A South Korean government spokesperson told the Financial Times (opens in a new tab) that the prosecution was investigating “many ways” to extradite the persons concerned, and may involve Interpol (issuance of a “red notice” was how this second crypto king was taken (opens in a new tab)), and/or cancel his South Korean passport to stop him from traveling.
Do Kwon was once a crypto-talking head, the kind of evangelist who was always ready with a catchy quote or to hit back at his critics. However, he has now done the digital equivalent of going underground, although for some reason he tweeted out a ‘full moon (opens in a new tab)‘ emoji yesterday.
He broke the cover about a month ago in a soft-scoop interview with Coinage, saying “we’ve never been in contact with [South Korean] investigators” and mulled over whether he would ever return to South Korea. Even before this arrest warrant, it was unlikely: the crash led to several suicides in South Korea, and Do Kwon is now an incredibly unpopular figure in the country.
Beneath its pomp, TerraUSD offered a ridiculously high 20% return for investors, through a mechanism called the Anchor Protocol. If you’re thinking “ponzi scheme”, you’re not alone, with US regulators proposing similar of Celsius crashand this protocol is one of the areas South Korean authorities are investigating.
For his part, Do Kwon seems a little delusional, insisting in his interview with Coinage that the problem was that UST was not big enough, and talking about an unnamed “mole” that apparently played a key role in the collapse.
“This was basically my life,” says Do Kwon. “I bet big and I think I lost.”
Do you think? When asked why his account seems inconsistent in some respects, and where the blame will ultimately lie, he regrets it.
“Interesting philosophical discussion. I think there are aspects of this where the participants are human, I think there are aspects of this where we are beasts. Interesting discussion.”
Thinking about prison, Do Kwon also gets a bit philosophical: “Life is long”. It may well be, but when you’re behind something that has affected so many people so badly, so can the phrase.
